• by March 28, 2004

Microsoft Corp.'s MSN will debut a search service within the next 12 months that includes a Newsbot, Blogbot, and Answerbot. Yusuf Mehdi, corporate vice president of the MSN Information Services & Merchant Platform division, gave more than 500 advertisers, agency executives, and other MSN business partners their first glimpse of features of the search service at last week's Strategic Account Summit held at the company's Redmond, Wash. Headquarters.

"Today, one out of every two people say they don't find what they're looking for in a search," Mehdi said. He demonstrated a MSN toolbar that offers consumers the ability to click once to narrow the search process. The MSN Newsbot, now in test mode and available in 10 countries outside of the United States, aggregates news from various sources. The Newsbot updates information every 10 minutes, organizes articles by category, links photos to each story, and suggests articles based on what a consumer has viewed in the past--similar to the way in which Amazon offers readers suggestions based on their past book or music selections.

The MSN Blogbot will allow Web surfers to find blogs featuring topics of their choosing, a feature that MSN says no other search provider currently offers. Also in development is the MSN Answerbot, which will offer the ability to answer questions such as "What's the highest mountain?" The Answerbot will employ a natural language interface.

Microsoft's MSN is a latecomer to the search party; MSN currently outsources its search services to Yahoo!'s Overture. Company CEO Steve Ballmer last week admitted that not developing search capabilities in-house is "probably the thing that I have felt worst about--not making the R&D (research and development) investment ourselves, upfront." Ballmer commented on the search issue during last week's MSN Strategic Account Summit. He said the company would have a service out within the next year, although some insiders say a product could be out as soon as the third quarter--but a paid inclusion service is likely to take much longer to develop.

"We will have the best search services in the world, bar none; the best information services, bar none; the best communications and PC help services, bar none," a revved-up Ballmer told attendees when asked about MSN's search strategy. "We want to be the best from a user and advertiser perspective; the technology will largely be built internally."

The MSN Newsbot will aggregate news from more than 4,000 global news sources and let consumers find news related to particular topics. They can also browse by section---sports, business, technology, or world news. Over time, the bot will offer personalized content and recommend relevant links based on previous reading habits. Mehdi said that in addition to being an essential tool for Internet users, search can also be used as a direct marketing and brand marketing tool. "Further standardization is required to make buying online [media] as easy as buying offline [media], but we feel that online has yet to leverage its most unique selling point---the richness of its data," Mehdi said. "Within the next 12 months, there will be an evolution in demographic and geographic targeting."

Mehdi said MSN's search product will also integrate aspects of social networking, instant messaging, and online gaming. David Cole, senior vice president of MSN, said that MSN's business now revolves around information services and online advertising, communication services, and premium services. He said the MSN model is a mix of advertising and revenue drawn from subscriptions and transactions. "The access business is a flat, declining business," Cole said.

Highlighting further changes in the MSN service, Mehdi and Cole said that MSN will introduce a music service later this year, an overhauled My MSN, and improvements related to customizing pages.